Your pension fund is being eyed as SOE debt relief

Looting private pensions, whether under the guise of ‘prescribed assets’ or any other terminology, will be disastrous.

President Cyril Ramaphosa and the ANC are creating an environment unfriendly to business.

After punting the unaffordable national health insurance scheme, Ramaphosa has signed into law the National Credit Amendment Bill, or debt-relief Bill. And the ANC has revived plans to use your pension money to bail out failing state-owned enterprises (SOEs) such as Eskom, SA Airways and the SA Broadcasting Corporation.

These are just some of the reckless options touted. Don’t forget expropriation without compensation.

Ideologically, the ANC is allergic to the International Monetary Fund (IMF). A likely downgrade by Moody’s in November will make SA a candidate for an IMF bailout, with stringent conditions.

You’d think there would be some attempt to show we are serious about fixing the economy. Yet the remedies trotted out will make things worse. For example, ANC economic policy head Enoch Godongwana told the Sunday Times it would be better to tap into R6 trillion assets now being privately managed than to approach the IMF or World Bank.

That’s a scary prospect not only for pensioners, but also for anyone contributing to a pension fund. Our badly managed SOEs have voracious appetites for taxpayers’ money. Despite much talk, none of them is turning around.

Ramaphosa is unable to ensure tough measures are taken. Looting private pensions, whether under the guise of “prescribed assets” or any other terminology, will be disastrous.

Politicians enjoy spending other people’s money, whether it comes from taxpayers or from private sector assets, such as pension funds. Yet money is not the solution to our SOEs. They all require restructuring to become sustainable.

If we get that right, investment will flow in. However, instead of allowing business to flourish, the governing party is trying to impose its uneconomic views. Banks, in particular, are feeling the squeeze.

According to Business Unity SA president Sipho Pityana, banks already have about R1 trillion invested in SOEs. He told Business Times there is a risk that banks may stop lending, or they may increase interest rates on loans to government.

The new law on debt relief will also increase pressure on banks. The National Credit Amendment Act allows for consumer debts to be scrapped if the person’s gross monthly income is not more than R7,500, and they have unsecured debt of R50,000, and the National Credit Regulator has found them to be critically indebted.

The number of people whose debt is written off may turn out be minuscule, given the hurdles. However, the negative implications include fewer loans to those most in need – the poor.

In addition, debt write-offs may make it more difficult to encourage a culture of payment for municipal services. The finer details of applicable conditions are already blurred amid a clamour for debt, in the expectation that such debt will be written off.

Through bailouts, SOEs have, in effect, had their debts repeatedly written off. So, too, have many folk who refuse to pay for services.